1. Adopt a project management methodology and use it consistently.

2. Implement a philosophy that drives the company toward project management maturity and communicate it to everyone.

3. Commit to developing effective plans at the beginning of each project.

4. Minimize scope changes by committing to realistic objectives.

5. Recognize that cost and schedule management are inseparable.

6. Select the right person as the project manager.

7. Provide executives with project sponsor information, not project management information.

8. Strengthen involvement and support of line management.

9. Focus on deliverables rather than resources.

10. Cultivate effective communication, cooperation, and trust to achieve rapid project management maturity.

11. Share recognition for project success with the entire project team and line management.

12. Eliminate nonproductive meetings.

13. Focus on identifying and solving problems early, quickly, and cost effectively.

14. Measure progress periodically.

15. Use project management software as a tool—not as a substitute for effective planning or interpersonal skills.

16. Institute an all-employee training program with periodic updates based upon documented lessons learned.

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A Systems Approach to Planning, Scheduling,

and Controlling


H A R O L D K E R Z N E R , P h . D . Senior Executive Director for Project Management

The International Institute for Learning New York, New York

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Cover illustration: xiaoke ma/iStockphoto

This book is printed on acid-free paper.

Copyright © 2013 by John Wiley & Sons, Inc. All rights reserved

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Library of Congress Cataloging-in-Publication Data: Kerzner, Harold.

Project management : a systems approach to planning, scheduling, and controlling / Harold Kerzner, Ph. D. Senior Executive

Director for Project Management, the International Institute for Learning, New York, New York. — Eleventh edition.

pages cm

Includes bibliographical references and index.

ISBN 978-1-118-02227-6 (cloth); ISBN 978-1-118-41585-6 (ebk); ISBN 978-1-118-41855-0 (ebk); ISBN 978-1-118-43357-7

(ebk); ISBN 978-1-118-48322-0 (ebk); ISBN 978-1-118-48323-7 (ebk) 1. Project management. 2. Project management—Case

studies. I. Title.

HD69.P75K47 2013

658.4’04 —dc23


Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

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Dr. Herman Krier,

my Friend and Guru,

who taught me well the

meaning of the word “persistence”

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Preface xxiii


1.0 Introduction 1 1.1 Understanding Project Management 2 1.2 Defining Project Success 7 1.3 Success, Trade-Offs, and Competing Constraints 8 1.4 The Project Manager–Line Manager Interface 9 1.5 Defining the Project Manager’s Role 14 1.6 Defining the Functional Manager’s Role 15 1.7 Defining the Functional Employee’s Role 18 1.8 Defining the Executive’s Role 19 1.9 Working with Executives 19 1.10 Committee Sponsorship/Governance 20 1.11 The Project Manager as the Planning Agent 23 1.12 Project Champions 24 1.13 The Downside of Project Management 25 1.14 Project-Driven versus Non–Project-Driven Organizations 25 1.15 Marketing in the Project-Driven Organization 28 1.16 Classification of Projects 30 1.17 Location of the Project Manager 30 1.18 Differing Views of Project Management 32 1.19 Public-Sector Project Management 34 1.20 International Project Management 38 1.21 Concurrent Engineering: A Project Management Approach 38 1.22 Added Value 39 1.23 Studying Tips for the PMI® Project Management Certification Exam 40

Problems 42

Case Study Williams Machine Tool Company 44


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2.0 Introduction 47 2.1 General Systems Management 48 2.2 Project Management: 1945–1960 48 2.3 Project Management: 1960–1985 49 2.4 Project Management: 1985–2012 55 2.5 Resistance to Change 59 2.6 Systems, Programs, and Projects: A Definition 64 2.7 Product versus Project Management: A Definition 66 2.8 Maturity and Excellence: A Definition 68 2.9 Informal Project Management: A Definition 69 2.10 The Many Faces of Success 70 2.11 The Many Faces of Failure 73 2.12 The Stage-Gate Process 76 2.13 Project Life Cycles 78 2.14 Gate Review Meetings (Project Closure) 83 2.15 Engagement Project Management 84 2.16 Project Management Methodologies: A Definition 85 2.17 Enterprise Project Management Methodologies 87 2.18 Methodologies Can Fail 91 2.19 Organizational Change Management and Corporate Cultures 94 2.20 Project Management Intellectual Property 100 2.21 Systems Thinking 101

2.22 Studying Tips for the PMI® Project Management Certification Exam 104

Problems 107

Case Study Creating a Methodology 108


3.0 Introduction 111 3.1 Organizational Work Flow 113 3.2 Traditional (Classical) Organization 114 3.3 Developing Work Integration Positions 117 3.4 Line-Staff Organization (Project Coordinator) 121 3.5 Pure Product (Projectized) Organization 122 3.6 Matrix Organizational Form 125 3.7 Modification of Matrix Structures 132 3.8 The Strong, Weak, or Balanced Matrix 136 3.9 Center for Project Management Expertise 136 3.10 Matrix Layering 137


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3.11 Selecting the Organizational Form 138 3.12 Structuring the Small Company 143 3.13 Strategic Business Unit (SBU) Project Management 146 3.14 Transitional Management 147 3.15 Barriers to Implementing Project Management in Emerging Markets 149 3.16 Seven Fallacies that Delay Project Management Maturity 156 3.17 Studying Tips for the PMI® Project Management Certification Exam 159

Problems 161

Case Studies Jones and Shephard Accountants, Inc. 166 Coronado Communications 168


4.0 Introduction 171 4.1 The Staffing Environment 172 4.2 Selecting the Project Manager: An Executive Decision 174 4.3 Skill Requirements for Project and Program Managers 178 4.4 Special Cases in Project Manager Selection 184 4.5 Selecting the Wrong Project Manager 184 4.6 Next Generation Project Managers 188 4.7 Duties and Job Descriptions 189 4.8 The Organizational Staffing Process 193 4.9 The Project Office 199 4.10 The Functional Team 204 4.11 The Project Organizational Chart 205 4.12 Special Problems 208 4.13 Selecting the Project Management Implementation Team 210 4.14 Mistakes Made by Inexperienced Project Managers 213 4.15 Studying Tips for the PMI® Project Management Certification Exam 214

Problems 216


5.0 Introduction 223 5.1 Controlling 225 5.2 Directing 225 5.3 Project Authority 230 5.4 Interpersonal Influences 237 5.5 Barriers to Project Team Development 240 5.6 Suggestions for Handling the Newly Formed Team 243

Contents ix

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5.7 Team Building as an Ongoing Process 246 5.8 Dysfunctions of a Team 247 5.9 Leadership in a Project Environment 250 5.10 Life-Cycle Leadership 252 5.11 Value-Based Project Leadership 255 5.12 Organizational Impact 257 5.13 Employee–Manager Problems 259 5.14 Management Pitfalls 262 5.15 Communications 265 5.16 Project Review Meetings 274 5.17 Project Management Bottlenecks 275 5.18 Cross-Cutting Skills 276 5.19 Active Listening 277 5.20 Project Problem-Solving 278 5.21 Brainstorming 288 5.22 Project Decision-Making 293 5.23 Predicting the Outcome of a Decision 301 5.24 Facilitation 303 5.25 Handling Negative Team Dynamics 306 5.26 Communication Traps 307 5.27 Proverbs and Laws 309 5.28 Human Behavior Education 311 5.29 Management Policies and Procedures 312 5.30 Studying Tips for the PMI® Project Management Certification Exam 313

Problems 318

Case Studies The Trophy Project 327 Communication Failures 329 McRoy Aerospace 332 The Poor Worker 333 The Prima Donna 334 The Team Meeting 335 Leadership Effectiveness (A) 337 Leadership Effectiveness (B) 341 Motivational Questionnaire 347


6.0 Introduction 355 6.1 Understanding Time Management 356 6.2 Time Robbers 356 6.3 Time Management Forms 358


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6.4 Effective Time Management 359 6.5 Stress and Burnout 360 6.6 Studying Tips for the PMI® Project Management Certification Exam 362

Problems 363

Case Study The Reluctant Workers 364


7.0 Introduction 365

7.1 Objectives 366

7.2 The Conflict Environment 367

7.3 Types of Conflicts 368

7.4 Conflict Resolution 371

7.5 Understanding Superior, Subordinate, and Functional Conflicts 372

7.6 The Management of Conflicts 374

7.7 Conflict Resolution Modes 375

7.8 Studying Tips for the PMI® Project Management Certification Exam 377

Problems 379

Case Studies Facilities Scheduling at Mayer Manufacturing 382

Telestar International 383

Handling Conflict in Project Management 384


8.0 Introduction 392 8.1 Performance Measurement 392 8.2 Financial Compensation and Rewards 399 8.3 Critical Issues with Rewarding Project Teams 405 8.4 Effective Project Management in the Small Business Organization 408 8.5 Mega Projects 410 8.6 Morality, Ethics, and the Corporate Culture 411 8.7 Professional Responsibilities 414 8.8 Internal Partnerships 417 8.9 External Partnerships 418 8.10 Training and Education 420 8.11 Integrated Product/Project Teams 422 8.12 Virtual Project Teams 424 8.13 Breakthrough Projects 427

Contents xi

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8.14 Managing Innovation Projects 427 8.15 Agile Project Management 430 8.16 Studying Tips for the PMI® Project Management Certification Exam 431

Problems 437

Case Study Is It Fraud? 440


9.0 Introduction 443 9.1 Predicting Project Success 444 9.2 Project Management Effectiveness 448 9.3 Expectations 449 9.4 Lessons Learned 450 9.5 Understanding Best Practices 451 9.6 Best Practices versus Proven Practices 458 9.7 Studying Tips for the PMI® Project Management Certification Exam 459

Problems 460

Case Study Radiance International 460


10.0 Introduction 463

10.1 The Project Sponsor 464

10.2 Handling Disagreements with the Sponsor 474

10.3 The Collective Belief 475

10.4 The Exit Champion 476

10.5 The In-House Representatives 477

10.6 Stakeholder Relations Management 478

10.7 Politics 486

10.8 Studying Tips for the PMI® Project Management Certification Exam 487

Problems 488

Case Studies Corwin Corporation 491

The Prioritization of Projects 499

The Irresponsible Sponsors 500

Selling Executives on Project Management 502

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11.0 Introduction 505 11.1 Validating the Assumptions 508 11.2 Validating the Objectives 509 11.3 General Planning 510 11.4 Life-Cycle Phases 513 11.5 Proposal Preparation 516 11.6 Kickoff Meetings 516 11.7 Understanding Participants’ Roles 519 11.8 Project Planning 519 11.9 The Statement of Work 521 11.10 Project Specifications 526 11.11 Milestone Schedules 528 11.12 Work Breakdown Structure 529 11.13 WBS Decomposition Problems 536 11.14 Work Breakdown Structure Dictionary 540 11.15 Role of the Executive in Project Selection 541 11.16 Role of the Executive in Planning 546 11.17 The Planning Cycle 546 11.17 Work Planning Authorization 547 11.19 Why Do Plans Fail? 548 11.20 Stopping Projects 549 11.21 Handling Project Phaseouts and Transfers 550 11.22 Detailed Schedules and Charts 551 11.23 Master Production Scheduling 554 11.24 Project Plan 556 11.25 Total Project Planning 561 11.26 The Project Charter 565 11.27 Project Baselines 566 11.28 Verification and Validation 570 11.29 Requirements Traceability Matrix 571 11.30 Management Control 572 11.31 The Project Manager–Line Manager Interface 575 11.32 Fast-Tracking 577 11.33 Configuration Management 578 11.34 Enterprise Project Management Methodologies 579 11.35 Project Audits 582 11.36 Studying Tips for the PMI® Project Management Certification Exam 583

Problems 586


12.0 Introduction 597 12.1 Network Fundamentals 600

Contents xiii

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12.2 Graphical Evaluation and Review Technique (GERT) 604 12.3 Dependencies 605 12.4 Slack Time 606 12.5 Network Replanning 612 12.6 Estimating Activity Time 616 12.7 Estimating Total Project Time 617 12.8 Total PERT/CPM Planning 618 12.9 Crash Times 620 12.10 PERT/CPM Problem Areas 623 12.11 Alternative PERT/CPM Models 626 12.12 Precedence Networks 627 12.13 Lag 630 12.14 Scheduling Problems 632 12.15 The Myths of Schedule Compression 632 12.16 Understanding Project Management Software 634 12.17 Software Features Offered 634 12.18 Software Classification 636 12.19 Implementation Problems 637 12.20 Critical Chain 638 12.21 Studying Tips for the PMI® Project Management Certification Exam 640

Problems 643

Case Studies Crosby Manufacturing Corporation 656 The Invisible Sponsor 658


13.0 Introduction 661 13.1 Customer Reporting 662 13.2 Bar (Gantt) Chart 663 13.3 Other Conventional Presentation Techniques 670 13.4 Logic Diagrams/Networks 673 13.5 Studying Tips for the PMI® Project Management Certification Exam 674

Problems 675


14.0 Introduction 677 14.1 Global Pricing Strategies 678 14.2 Types of Estimates 679 14.3 Pricing Process 682 14.4 Organizational Input Requirements 684 14.5 Labor Distributions 686


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14.6 Overhead Rates 690 14.7 Materials/Support Costs 692 14.8 Pricing Out the Work 695 14.9 Smoothing Out Department Man-Hours 696 14.10 The Pricing Review Procedure 698 14.11 Systems Pricing 700 14.12 Developing the Supporting/Backup Costs 701 14.13 The Low-Bidder Dilemma 705 14.14 Special Problems 705 14.15 Estimating Pitfalls 706 14.16 Estimating High-Risk Projects 707 14.17 Project Risks 708 14.18 The Disaster of Applying the 10 Percent Solution to Project Estimates 712 14.19 Life-Cycle Costing (LCC) 714 14.20 Logistics Support 719 14.21 Economic Project Selection Criteria: Capital Budgeting 720 14.22 Payback Period 720 14.23 The Time Value of Money 721 14.24 Net Present Value (NPV) 722 14.25 Internal Rate of Return (IRR) 723 14.26 Comparing IRR, NPV, and Payback 724 14.27 Risk Analysis 724 14.28 Capital Rationing 725 14.29 Project Financing 726 14.30 Studying Tips for the PMI® Project Management Certification Exam 728

Problems 730

Case Study The Estimating Problem 734


15.0 Introduction 737 15.1 Understanding Control 741 15.2 The Operating Cycle 744 15.3 Cost Account Codes 745 15.4 Budgets 750 15.5 The Earned Value Measurement System (EVMS) 752 15.6 Variance and Earned Value 754 15.7 The Cost Baseline 773 15.8 Justifying the Costs 775 15.9 The Cost Overrun Dilemma 778 15.10 Recording Material Costs Using Earned Value Measurement 779 15.11 The Material Accounting Criterion 782

Contents xv

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15.12 Material Variances: Price and Usage 783 15.13 Summary Variances 784 15.14 Status Reporting 785 15.15 Cost Control Problems 792 15.16 Project Management Information Systems 793 15.17 Enterprise Resource Planning 793 15.18 Project Metrics 794 15.19 Key Performance Indicators 800 15.20 Value-Based Metrics 806 15.21 Dashboards and Scorecards 812 15.22 Business Intelligence 815 15.23 Infographics 816 15.24 Studying Tips for the PMI® Project Management Certification Exam 816

Problems 820

Case Studies The Bathtub Period 838 Franklin Electronics 839 Trouble in Paradise 841


16.0 Introduction 845 16.1 Methodology for Trade-Off Analysis 848 16.2 Contracts: Their Influence on Projects 865 16.3 Industry Trade-Off Preferences 866 16.4 Conclusion 869

16.5 Studying Tips for the PMI® Project Management

Certification Exam 869


17.0 Introduction 872 17.1 Definition of Risk 873 17.2 Tolerance for Risk 875 17.3 Definition of Risk Management 876

17.4 Certainty, Risk, and Uncertainty 877 17.5 Risk Management Process 883 17.6 Plan Risk Management (11.1) 884 17.7 Risk Identification (11.2) 885 17.8 Risk Analysis (11.3, 11.4) 892 17.9 Qualitative Risk Analysis (11.3) 897 17.10 Quantitative Risk Analysis (11.4) 903 17.11 Probability Distributions and the Monte Carlo Process 904 17.12 Plan Risk Response (11.5) 913


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17.13 Monitor and Control Risks (11.6) 919 17.14 Some Implementation Considerations 920 17.15 The Use of Lessons Learned 921 17.16 Dependencies Between Risks 925 17.17 The Impact of Risk Handling Measures 930 17.18 Risk and Concurrent Engineering 933 17.19 Studying Tips for the PMI® Project Management Certification Exam 936

Problems 940

Case Studies Teloxy Engineering (A) 948 Teloxy Engineering (B) 948 The Risk Management Department 949


18.0 Introduction 953 18.1 General Theory 954 18.2 The Learning Curve Concept 954 18.3 Graphic Representation 956 18.4 Key Words Associated with Learning Curves 958 18.5 The Cumulative Average Curve 958 18.6 Sources of Experience 960 18.7 Developing Slope Measures 963 18.8 Unit Costs and Use of Midpoints 964 18.9 Selection of Learning Curves 965 18.10 Follow-On Orders 966 18.11 Manufacturing Breaks 966 18.12 Learning Curve Limitations 968 18.13 Prices and Experience 968 18.14 Competitive Weapon 970 18.15 Studying Tips for the PMI® Project Management Certification Exam 971

Problems 972


19.0 Introduction 975 19.1 Procurement 976 19.2 Plan Procurements 978 19.3 Conducting the Procurements 981 19.4 Conduct Procurements: Request Seller Responses 983 19.5 Conduct Procurements: Select Sellers 983 19.6 Types of Contracts 987 19.7 Incentive Contracts 991 19.8 Contract Type versus Risk 994

Contents xvii

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19.9 Contract Administration 995 19.10 Contract Closure 998 19.11 Using a Checklist 999 19.12 Proposal-Contractual Interaction 1000 19.13 Summary 1003 19.14 Studying Tips for the PMI® Project Management Certification Exam 1004

Case Studies The Scheduling Dilemma 1009 To Bid or Not to Bid 1011 The Management Reserve 1012


20.0 Introduction 1016 20.1 Definition of Quality 1017 20.2 The Quality Movement 1019 20.3 Comparison of the Quality Pioneers 1022 20.4 The Taguchi Approach 1023 20.5 The Malcolm Baldrige National Quality Award 1026 20.6 ISO 9000 1027 20.7 Quality Management Concepts 1029 20.8 The Cost of Quality 1032 20.9 The Seven Quality Control Tools 1035 20.10 Process Capability (CP) 1052 20.11 Acceptance Sampling 1054 20.12 Implementing Six Sigma 1054 20.13 Lean Six Sigma and DMAIC 1056 20.14 Quality Leadership 1057 20.15 Responsibility for Quality 1058 20.16 Quality Circles 1058 20.17 Just-In-Time Manufacturing (JIT) 1059 20.18 Total Quality Management (TQM) 1061 20.19 Studying Tips for the PMI® Project Management Certification Exam 1065


21.0 Introduction 1069 21.1 The Project Management Maturity Model (PMMM) 1070 21.2 Developing Effective Procedural Documentation 1074 21.3 Project Management Methodologies 1078 21.4 Continuous Improvement 1079 21.5 Capacity Planning 1080 21.6 Competency Models 1082 21.7 Managing Multiple Projects 1084 21.8 End-of-Phase Review Meetings 1085


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Case Study Honicker Corporation 1086


22.0 Introduction 1089 22.1 Need for Business Knowledge 1091 22.2 Timing of Scope Changes 1092 22.3 Business Need for a Scope Change 1093 22.4 Rationale for Not Approving a Scope Change 1094

Case Study Kemko Manufacturing 1094


23.0 Introduction 1097 23.1 Present-Day Project Office 1098 23.2 Implementation Risks 1099 23.3 Types of Project Offices 1100 23.4 Networking Project Management Offices 1101 23.5 Project Management Information Systems 1101 23.6 Dissemination of Information 1103 23.7 Mentoring 1104 23.8 Development of Standards and Templates 1105 23.9 Project Management Benchmarking 1105 23.10 Business Case Development 1106 23.11 Customized Training (Related to Project Management) 1107 23.12 Managing Stakeholder Relations 1108 23.13 Continuous Improvement 1109 23.14 Capacity Planning 1109 23.15 Risks of Using a Project Office 1110 23.16 Project Portfolio Management 1111

Case Study The Project Management Lawsuit 1116


24.0 Introduction 1119 24.1 Understanding Crisis Management 1119 24.2 Ford versus Firestone 1121 24.3 The Air France Concorde Crash 1122 24.4 Intel and the Pentium Chip 1123 24.5 The Russian Submarine Kursk 1123 24.6 The Tylenol Poisonings 1124

Contents xix

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24.7 Nestlé’s Marketing of Infant Formula 1127 24.8 The Space Shuttle Challenger Disaster 1129 24.9 The Space Shuttle Columbia Disaster 1130 24.10 Victims Versus Villains 1131 24.11 Life-Cycle Phases 1132 24.12 Project Management Implications 1133


25.0 Changing Times 1135 25.1 Complex Projects 1139 25.2 Complexity Theory 1144 25.3 Scope Creep 1145 25.4 Project Health Checks 1151 25.5 Managing Troubled Projects 1155


26.0 Introduction 1167 26.1 Naming the Project “Iridium” 1169 26.2 Obtaining Executive Support 1170 26.3 Launching the Venture 1170 26.4 The Iridium System 1172 26.5 The Terrestrial and Space-Based Network 1172 26.6 Project Initiation: Developing the Business Case 1173 26.7 The “Hidden” Business Case 1175 26.8 Risk Management 1175 26.9 The Collective Belief 1177 26.10 The Exit Champion 1177 26.11 Iridium’s Infancy Years 1178 26.12 Debt Financing 1181 26.13 The M-Star Project 1182 26.14 A New CEO 1183 26.15 Satellite Launches 1183 26.16 An Initial Public Offering (IPO) 1184 26.17 Signing Up Customers 1184 26.18 Iridium’s Rapid Ascent 1185 26.19 Iridium’s Rapid Descent 1187 26.20 The Iridium “Flu” 1191 26.21 Searching for a White Knight 1192 26.22 The Definition of Failure (October, 1999) 1192 26.23 The Satellite Deorbiting Plan 1193 26.24 Iridium is Rescued for $25 Million 1194 26.25 Iridium Begins to Grow 1194


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26.26 Shareholder Lawsuits 1195 26.27 The Bankruptcy Court Ruling 1195 26.28 Autopsy 1196 26.29 Financial Impact of the Bankruptcy 1197 26.30 What Really Went Wrong? 1198 26.31 Lessons Learned 1200 26.32 Conclusion 1202

Appendix A. Solutions to the Project Management Conflict Exercise 1205 Appendix B. Solution to Leadership Exercise 1211 Appendix C. Dorale Products Case Studies 1217 Appendix D. Solutions to the Dorale Products Case Studies 1229 Appendix E. Alignment of the PMBOK® Guide to the Text 1235

Author Index 1241

Subject Index 1243

Contents xxi

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Project management has evolved from a management philosophy restricted to a few functional areas and regarded as something nice to have to an enterprise pro- ject management system affecting every functional unit of the company. Simply stated, project management has evolved into a business process rather than merely a project management process. More and more companies are now regarding project management as being mandatory for the survival of the firm. Organizations that were opponents of project management are now advocates. Management educators of the past, who preached that project management could not work and would be just another fad, are now staunch supporters. Project man- agement is here to stay. Colleges and universities are now offering graduate degrees in project management.

The text discusses the principles of project management. Students who are interested in advanced topics, such as some of the material in Chapters 21 to 25 of this text, may wish to read one of my other texts, Advanced Project Management: Best Practices in Implementation (New York: Wiley, 2004) and Project Management Best Practices: Achieving Global Excellence, 2nd edition (Hoboken, NJ: Wiley and IIL Publishers, 2010). John Wiley & Sons and the International Institute for Learning also introduced a four-book series on project management best practices, authored by Frank Saladis, Carl Belack, and Harold Kerzner.

This book is addressed not only to those undergraduate and graduate students who wish to improve upon their project management skills but also to those func- tional managers and upper-level executives who serve as project sponsors and must provide continuous support for projects. During the past several years,


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management’s knowledge and understanding of project management has matured to the point where almost every company is using project management in one form or another. These companies have come to the realization that project man- agement and productivity are related and that we are now managing our business as though it is a series of projects. Project management coursework is now con- suming more of training budgets than ever before.

General reference is provided in the text to engineers. However, the reader should not consider project management as strictly engineering-related. The engi- neering examples are the result of the fact that project management first appeared in the engineering disciplines, and we should be willing to learn from their mis- takes. Project management now resides in every profession, including information systems, health care, consulting, pharmaceutical, banks, and government agencies.

The text can be used for both undergraduate and graduate courses in business, information systems, and engineering. The structure of the text is based upon my belief that project management is much more behavioral than quantitative since projects are managed by people rather than tools. The first five chapters are part of the basic core of knowledge necessary to understand project management. Chapters 6 through 8 deal with the support functions of managing your time effec- tively, conflicts, and other special topics. Chapters 9 and 10 describe factors for predicting success and management support. It may seem strange that ten chapters on organizational behavior and structuring are needed prior to the “hard-core” chapters of planning, scheduling, and controlling. These first ten chapters are needed to understand the cultural environment for all projects and systems. These chapters are necessary for the reader to understand the difficulties in achieving cross-functional cooperation on projects where team members are working on multiple projects concurrently and why the people involved, all of whom may have different backgrounds, cannot simply be forged into a cohesive work unit without friction. Chapters 11 through 20 are more of the quantitative chapters on planning, scheduling, cost control, estimating, contracting (and procurement), and quality. The next five chapters are advanced topics and future trends. Chapter 26 is a cap- stone case study that can be related to almost all of the chapters in the text.

The changes that were made in the eleventh edition include:

● A new section on success, trade-offs, and competing constraints ● A new section on added value ● A new section on business intelligence ● A new section on project governance ● An updated section on processes supporting project management ● An updated section on the types of project closure ● A new section on engagement project management ● A new section on barriers to implementing project management in

emerging markets ● A new section on fallacies in implementing project management ● A new section on enterprise project management systems ● A new section on How Project Management Methodologies Can Fail

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● A new section on the future of project management ● A new section on managing complex projects ● A new section on managing scope creep ● A new section on project health checks ● A new section on how to recover a troubled project ● A new section on managing public projects ● A new section on managing international projects ● A new section on project politics ● A new section on twenty common mistakes in project management ● A new section on managing innovation projects ● A new section on the differences between best practices and proven


● An updated section on project sponsorship ● An updated section on culture, teamwork, and trust ● A New Section on stakeholder relations management ● A new section on value-based leadership ● An updated section on validating project assumptions ● A new section on validating project objectives ● A new section on the WBS dictionary ● A new section on validation and verification ● A new section on project management baselines ● A new section on the traceability matrix ● An expansion on WBS core attributes ● An expansion on using the WBS and WBS dictionary for verification ● A new section on project management metrics ● A new section on key performance indicators ● A new section on value metrics ● A new section on project management dashboards ● A new section on portfolio management ● A new section on complexity theory ● A new section on project management information systems ● A new section on enterprise resource planning ● A new section on project problem solving ● A new section on brainstorming ● A new section on project decision-making ● A new section on determining the impact of a decision ● A new section on active listening ● A new section on agile project management ● A capstone case study which can be used as a review of the entire

PMBOK® Guide, 5th edition, domain areas

The text contains more than 25 case studies, more than 125 multiple-choice questions, and nearly 400 discussion questions. There is also a separate book of cases (Project Management Case Studies, fourth edition) that provides additional real-world examples.

Preface xxv

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This text, the PMBOK® Guide, and the book of cases are ideal as self-study tools for the Project Management Institute’s PMP® Certification exam. Because of this, there are tables of cross references on each chapter’s opening page in the textbook detailing the sections from the book of cases and the Guide to the Project Management Body of Knowledge (PMBOK® Guide) that apply to that chapter’s content. The left-hand margin of the pages in the text has side bars that identify the cross-listing of the material on that page to the appropriate section(s) of the PMBOK® Guide. At the end of most of the chapters is a section on study tips for the PMP® exam, including more than 125 multiple-choice questions.

This textbook is currently used in the college market, in the reference mar- ket, and for studying for the PMP® Certification exam. Therefore, to satisfy the needs of all markets, a compromise had to be reached on how much of the text would be aligned to the PMBOK® Guide and how much new material would be included without doubling the size of the text. Some colleges and universities use the textbook to teach project management fundamentals without reference to the PMBOK® Guide. The text does not contain all of the material necessary to sup- port each section of the PMBOK® Guide. Therefore, to study for the PMP®

Certification exam, the PMBOK® Guide must also be used together with this text. The text covers material for almost all of the PMBOK® Guide knowledge areas but not necessarily in the depth that appears in the PMBOK® Guide.

An instructor’s manual is available only to college and university faculty members by contacting your local Wiley sales representative or by visiting the Wiley website at www.wiley.com/kerzner. This website includes not only the instructor’s manual but also 500 PowerPoint slides that follow the content of the book and help organize and execute classroom instruction and group learning. Access to the instructor’s material can be provided only through John Wiley & Sons, not the author.

One-, two-, and three-day seminars on project management and the PMP®

Certification Training using the text are offered by contacting Lori MIlhaven, Executive Vice President, the International Institute for Learning, at 800-325- 1533, extension 5121 (email address: lori.milhaven@iil.com).

The problems and case studies at the ends of the chapters cover a variety of industries. Almost all of the case studies are real-world situations taken from my consulting practice. Feedback from my colleagues who are using the text has pro- vided me with fruitful criticism, most of which has been incorporated into the tenth edition.

The majority of the articles on project management that have become clas- sics have been referenced in the textbook throughout the first eleven chapters. These articles were the basis for many of the modern developments in project management and are therefore identified throughout the text.

Many colleagues provided valuable criticism. In particular, I am indebted to those industrial/government training managers whose dedication and commit- ment to quality project management education and training have led to valuable changes in this and previous editions. In particular, I wish to thank Frank Saladis, PMP®, Senior Consultant and Trainer with the International Institute for


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Learning, for his constructive comments, recommendations, and assistance with the mapping of the text to the PMBOK® Guide as well as recommended changes to many of the chapters. I am indebted to Dr. Edmund Conrow, PMP®, for a decade of assistance with the preparation of the risk management chapters in all of my texts. I am also indebted to Dr. Rene Rendon for his review and recom- mendations for changes to the chapter on contract management.

To the management team and employees of the International Institute for Learning, thank you all for 20 years of never-ending encouragement, support, and assistance with all of my project management research and writings.

Harold Kerzner The International Institute for Learning

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Related Case Studies Related Workbook Exercises (from PMBOK® Guide, 5th (from Kerzner/Project Kerzner/Project Management Edition, Reference Management Case Studies, Workbook and PMP ®/CAPM ® Exam Section for the PMP®

4th Edition) Study Guide, 11th Edition) Certification Exam

• Kombs Engineering • Multiple Choice Exam • Integration • Williams Machine Management

Tool Company* • Scope • Hyten Corporation Management • Macon, Inc. • Human Resource • Continental Computer Management

Corporation • Jackson Industries


Executives will be facing increasingly complex challenges during the next decade. These challenges will be the result of high escalation factors for salaries and raw materials, increased union demands, pressure from stockholders, and the possibility of long-term high inflation accompanied by a mild recession and a lack of borrowing power with financial institutions. These environmental conditions have existed before, but not to the degree that they do today.

*Case Study also appears at end of chapter.


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In the past, executives have attempted to ease the impact of these environmental conditions by embark- ing on massive cost-reduction programs. The usual results of these programs have been early retirement, layoffs, and a reduction in manpower through attrition. As jobs become vacant, executives pressure line managers to accomplish the same amount of work with fewer resources, either by improving efficiency or by upgrading performance requirements to a higher position on the learning curve. Because people costs are more inflationary than the cost of equipment or facilities, executives are funding more and more capi- tal equipment projects in an attempt to increase or improve productivity without increasing labor.

Unfortunately, executives are somewhat limited in how far they can go to reduce manpower without running a high risk to corporate profitability. Capital equipment projects are not always the answer. Thus, executives have been forced to look elsewhere for the solutions to their problems.

Almost all of today’s executives are in agreement that the solution to the majority of corporate problems involves obtaining better control and use of existing corporate resources, looking internally rather than exter- nally for the solution. As part of the attempt to achieve an internal solution, executives are taking a hard look at the ways corporate activities are managed. Project management is one of the techniques under consideration.

The project management approach is relatively modern. It is characterized by methods of restructuring management and adapting special management techniques, with the purpose of obtaining better control and use of existing resources. Forty years ago project management was confined to U.S. Department of Defense contractors and construction companies. Today, the concept behind project management is being applied in such diverse industries and organizations as defense, construction, pharmaceuticals, chemicals, banking, hospitals, accounting, advertising, law, state and local governments, and the United Nations.

The rapid rate of change in both technology and the marketplace has created enormous strains on exist- ing organizational forms. The traditional structure is highly bureaucratic, and experience has shown that it cannot respond rapidly enough to a changing environment. Thus, the traditional structure must be replaced by project management, or other temporary management structures that are highly organic and can respond very rapidly as situations develop inside and outside the company.

Project management has long been discussed by corporate executives and academics as one of several workable possibilities for organizational forms of the future that could integrate complex efforts and reduce bureaucracy. The acceptance of project management has not been easy, however. Many executives are not willing to accept change and are inflexible when it comes to adapting to a different environment. The proj- ect management approach requires a departure from the traditional business organizational form, which is basically vertical and which emphasizes a strong superior–subordinate relationship.


In order to understand project management, one must begin with the definition of a project. A project can be considered to be any series of activities and tasks that:

● Have a specific objective to be completed within certain specifications ● Have defined start and end dates ● Have funding limits (if applicable) ● Consume human and nonhuman resources (i.e., money, people, equipment) ● Are multifunctional (i.e., cut across several functional lines)


PMBOK® Guide, 5th Edition 1.2 What Is a Project?

1.3 What Is Project Management?

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Project management, on the other hand, involves five process groups as identified in the PMBOK® Guide, namely:

● Project initiation ● Selection of the best project given resource limits ● Recognizing the benefits of the project ● Preparation of the documents to sanction the project ● Assigning of the project manager

● Project planning ● Definition of the work requirements ● Definition of the quality and quantity of work ● Definition of the resources needed ● Scheduling the activities ● Evaluation of the various risks

● Project execution ● Negotiating for the project team members ● Directing and managing the work ● Working with the team members to help them improve

● Project monitoring and control ● Tracking progress ● Comparing actual outcome to predicted outcome ● Analyzing variances and impacts ● Making adjustments

● Project closure ● Verifying that all of the work has been accomplished ● Contractual closure of the contract ● Financial closure of the charge numbers ● Administrative closure of the papework

Successful project management can then be defined as having achieved the project objectives:

● Within time ● Within cost ● At the desired performance/technology level ● While utilizing the assigned resources effectively and efficiently ● Accepted by the customer

The potential benefits from project management are:

● Identification of functional responsibilities to ensure that all activities are accounted for, regardless of personnel turnover

● Minimizing the need for continuous reporting ● Identification of time limits for scheduling ● Identification of a methodology for trade-off analysis ● Measurement of accomplishment against plans

Understanding Project Management 3

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● Early identification of problems so that corrective action may follow ● Improved estimating capability for future planning ● Knowing when objectives cannot be met or will be exceeded

Unfortunately, the benefits cannot be achieved without overcoming obstacles such as:

● Project complexity ● Customer’s special requirements and scope changes ● Organizational restructuring ● Project risks ● Changes in technology ● Forward planning and pricing

Project management can mean different things to different people. Quite often, people misunderstand the concept because they have ongoing projects within their company and feel that they are using project management to control these activities. In such a case, the following might be considered an appropriate definition:

Project management is the art of creating the illusion that any outcome is the result of a series of predetermined, deliberate acts when, in fact, it was dumb luck.

Although this might be the way that some companies are running their projects, this is not project management. Project management is designed to make better use of existing resources by getting work to flow horizontally as well as vertically within the company. This approach does not really destroy the vertical, bureaucratic flow of work but simply requires that line organizations talk to one another horizontally so work will be accomplished more smoothly throughout the organization. The vertical flow of work is still the responsibility of the line managers. The horizontal flow of work is the responsibility of the project managers, and their primary effort is to communicate and coordinate activities horizontally between the line organizations.

Figure 1–1 shows how many companies are structured. There are always “class or prestige” gaps between various levels of management. There are also functional gaps between working units of the organization.

If we superimpose the management gaps on top of the functional gaps, we find that com- panies are made up of small operational islands that refuse to communicate with one another for fear that giving up information may strengthen their opponents. The project manager’s responsibility is to get these islands to communicate cross-functionally toward common goals and objectives.

The following would be an overview definition of project management:

Project management is the planning, organizing, directing, and controlling of company resources for a relatively short-term objective that has been established to complete specific goals and objectives. Furthermore, project management uti- lizes the systems approach to management by having functional personnel (the vertical hierarchy) assigned to a specific project (the horizontal hierarchy).

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